Help Center / Revenue Compliance

Revenue Recognition Rules Overview

Revenue recognition is a fundamental accounting principle that determines when to record revenue in your financial statements. Light's revenue recognition framework helps multinational companies comply with accounting standards like IFRS 15 while managing complex multi-entity and multi-currency scenarios.

What is this page about

This page covers how Light times your revenue recognition: the two patterns it supports, how you configure them with release templates, what happens when a document posts, and how multi-currency and audit history are handled. Read it before setting up your first template.

On this page

  • What is revenue recognition?
  • Key revenue recognition scenarios
  • Configuring revenue recognition rules
  • Multi-currency considerations
  • Audit trail and compliance
  • Related articles

What is revenue recognition?

Revenue recognition defines the timing of when you record revenue from the sale of goods or services. Under IFRS 15 and ASC 606, revenue is recognised when (or as) performance obligations to customers are satisfied. This may not always align with the timing of cash receipts.

For multinational companies, revenue recognition becomes more complex when dealing with multiple entities, currencies, and business models. Light simplifies this by providing structured rules that enforce compliance across your entire organisation.

Key revenue recognition scenarios

Light supports two primary revenue recognition scenarios:

Straight-line recognition spreads revenue evenly across a defined period, with a partial adjustment for the first and last months when the period does not start or end exactly on month boundaries (prorated by actual days, with the last month absorbing any rounding). This is common for service contracts and subscriptions where performance obligations are satisfied gradually over time. You set this up by applying a release template to the relevant line, together with a recognition start and end date. What happens when the document posts depends on the template type: for a Revenue contract template, Light automatically creates a linked Deferred Entry (DE) document as part of contract accounting, to record and release the deferred amount over time. For an AR (sales invoice) template applied directly to an invoice line, Light instead generates the release schedule as a series of linked ledger transactions on the invoice itself, inheriting the invoice's own document type. No separate DE document is created in that case.

Point-in-time recognition records revenue immediately when the invoice is posted, such as for product sales. Light applies this to any invoice line that carries no release template. It is a conceptual label for that behaviour rather than a named mode you select in the system.

Configuring revenue recognition rules

You configure revenue recognition rules by setting up accounting release templates under Settings → Records → Releases templates (Releases templates). Each template defines its Type, the recognition method, the Contra account that holds the deferred amount, and an optional default duration.

Light offers five template types: Accounts payables, Accounts receivables, Journal entry, Revenue contract, and Fixed asset. This article covers the two revenue ones, Accounts receivables and Revenue contract. See Configuring releases for the others.

Revenue contract templates additionally require a contract asset account. Once configured, you apply a template to individual invoice or contract lines, setting the recognition start and end dates on each line. You can track the resulting release schedules under Accounting → Releases (Releases).

Good to know: Revenue recognition rules are applied at the document line level, giving you granular control over which invoice items follow specific recognition patterns.

Multi-currency considerations

For companies operating in multiple currencies, Light handles exchange rate movements when recognising revenue. To match your internal rate locking policies, set an FX rate override on the document itself, which replaces the default rate lookup for that document. This override is set through Light's API rather than on a screen in the app, and release templates carry no rate of their own.

Audit trail and compliance

Changes to deferred entries and release schedules are captured in a field-level history, recording who changed what, the before and after values, and when. This history is available for audit review.

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